DCIT-1(3)(1), , MUMBAI V. M/S FUTURE ENTERPRISES LIMITED, MUMBAI

ITA 512/MUM/2023

AI Insights

The case involves the Revenue's appeal against the decision of the learned CIT(A) which allowed the assessee's appeal by deleting the disallowance made under section 40(a)(ia) of the Income Tax Act, 1961. The disallowance pertained to service fees retained by banks on credit card charges, which the Assessing Officer had treated as commission under section 194H. The CIT(A) and the Tribunal's earlier decisions found that such payments are not commissions but bank charges, and thus not subject to TDS. The Tribunal dismissed the Revenue's appeal, citing consistency with previous rulings and judicial decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299239 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 20-02-2023
• Other Referred Cases: CIT vs JDS Apparels Pvt. Ltd. (330 ITR 454), ACIT vs M/s. Future Enterprises Limited (ITA No. 4935/Del./2015 dated 13/02/2019), DCIT, Range 8(2) vs Future Retail Limited (I.T.A. No. 5476/Mum-2013 dated 05/05/2017), ACIT v. Jet Airways India Ltd (146 ITD 682), Gems Paradise v. ACIT [IT Appeal No. 746 (JP) of 2011, dated 2.2.2012], Bhandari Jewellers v. ACIT [IT Appeal No. 745 (JP) of 2011, dated 2-2-2012], Tata Teleservices Ltd. v. Dy. CIT [2013] 140 ITD 451/29 taxmann.com 261 (Bang.), Dy. CIT v. Vah Magna Retail (P.) Ltd [IT Appeal No.905 (Hyd.) of 2011, dated 10- 4-2012]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 40(a)(ia); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.512/Mum./2023 (Assessment Year : 2013–14) Dy. Commissioner of Income Tax Circle–1(3)(1), Mumbai ................ Appellant v/s M/s. Future Enterprises Limited Knowledge House, Shyam Nagar Off J.V.R.L., Jogeshwari (East) Mumbai 400 060 PAN – AAACP6317L ................Respondent Assessee by : None Revenue by : Shri Ankush Kapoor Date of Hearing – 26/04/2023 Date of Order – 27/04/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 23/12/2022, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2013-14. 2. When the present appeal was called for hearing neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. Therefore, in view of the above, we proceed to dispose off the present appeal M/s. Future Enterprises Limited ITA no.512/Mum./2023 Page | 2 ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned DR”) and on the basis of material available on record. 3. In this appeal, the Revenue has raised the following grounds:- “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the disallowance made u/s 40(a)(ia) amounting to Rs. 37,36,72,805/- on account of non deduction of tax on service fees retained by the bank on credit card charges whereas the AO has in the order passed held that commission paid to credit card charges be considered as failing within the preview of section 194H and 194] of the Act. 2. The Appellant prays that the order of the CIT(A) on the above ground be set aside and that of the DCIT 1(3)(1), Mumbai be restored. 3. The Appellant craves leave to amend or alter any grounds or add a new ground which may necessary.” 4. The only grievance of the Revenue, in the present appeal, is against the deletion of disallowance made under section 40(a)(ia) of the Act in respect of service fees retained by the bank on credit card charges. 5. The brief facts of the case as emanating from the record are: The assessee is engaged in the business of multi-brand retail trade in various areas such as fashion, food, home-made, electronics, and technology. For the year under consideration, the assessee filed its return of income on 30/11/2013, declaring a loss of Rs.258,37,24,657. During the assessment proceedings, upon perusal of the profit and loss account of the assessee, it was observed that the assessee has claimed credit card charges of Rs.7,06,16,768, under the head „other expenses‟. Accordingly, the assessee was asked to show cause as to why the disallowance under section 40(a)(ia) of the Act be not made, if TDS is not deducted as per provisions of section 194H of the Act. In response thereto, the assessee submitted that the bank is not acting on behalf of the M/s. Future Enterprises Limited ITA no.512/Mum./2023 Page | 3 merchant establishment in dealing with 3 rd parties. It was further submitted that the payments made by credit/debit cards are more convenient means of payment, to which end, the bank and the merchant establishment have agreed to certain terms and conditions facilitating such credit card payments. The assessee relied on various judicial pronouncements in support of its plea that TDS is not deductible under section 194H of the Act on such payments. The Assessing Officer (“AO”) vide order dated 31/03/2016, passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that mode of payment between the assessee and the banks is clearly covered by the provisions of section 194H, as the banks provide credit card facilities to the assessee and for that commission is charged by them, but there is no reason why the assessee should not deduct TDS on such payment/expenses debited in the profit and loss account. Accordingly, the AO held that the provisions of section 194H of the Act are clearly attracted to the transactions between the banks and the assessee for charging commission on providing credit card facilities. As a result, the AO disallowed commission on credit cards of Rs.37,36,72,805 under section 40(a)(ia) of the Act, on which no TDS was deducted by the assessee. 6. The learned CIT(A) vide impugned order allowed the appeal filed by the assessee on this issue by following the decision of the coordinate bench of the Tribunal rendered in assessee‟s own case in earlier assessment year. The learned CIT(A) also noted that this issue is also covered in favour of the assessee by the decision of the Hon‟ble Delhi High Court in CIT vs JDS Apparels Pvt. Ltd. (330 ITR 454) and the decision of the Tribunal in ACIT vs M/s. Future Enterprises Limited ITA no.512/Mum./2023 Page | 4 The Indian Hotels Company Ltd. (ITA No. 4935/Del./2015 dated 13/02/2019). Being aggrieved, the Revenue is in appeal before us. 7. We have considered the submission of the learned DR and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee‟s own case in DCIT, Range 8(2) vs Future Retail Limited, in I.T.A. No. 5476/Mum-2013, vide order dated 05/05/2017, for the assessment year 2010-11, after following various judicial pronouncements on similar issue held that the commission paid to the credit card companies is not subject to the TDS provisions of the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are as under:- “Ground No. 2 to 9. Since all the above grounds raised by the revenue are inter-connected and inter related and pertains to the disallowance under section 40(a)(ia) of the Act in respect of commission on credit card companies paid to various banks for non- deduction of tax at source which was reversed by the CIT(A). As per the facts of the case, during the course of the assessment proceedings, the Assessing Officer disallowed the commission on credit card paid to various banks under Section 40(a)(i) of the Act by holding that the credit card transaction was in nature of commission for providing complex services by using sophisticated professional skill and technology and consequently the provisions of section 194H of the Act were attracted. The Assessing Officer also held on a without prejudice basis that the commission was paid for technical services subject to deduction of tax under section 1943 of the Act. The Ld.DR appearing on behalf of the revenue relied upon the order of the A.O. whereas the Ld.AR relying on the decision of the CIT(Appeals) as well as decisions of the co-ordinate bench of the Tribunal in the case of ACIT v. Jet Airways India Ltd (146 ITD 682) and Delhi Tribunal in the case of JDS Apparels (P.) Ltd. (370 ITR 454), contended that the aforesaid commission was not subject to deduction of tax under section 194H/section 194J. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. At the outset, we find that the Assessee has correctly placed reliance on the decision of the co-ordinate bench in the case of ACIT v. Jet Airways India Ltd (146 ITD 682) wherein it was held that "Payments to banks for utilization of credit card facilities are in nature of bank charges, and not commission, and therefore, no tax is deductible at source under section 194H". M/s. Future Enterprises Limited ITA no.512/Mum./2023 Page | 5 The Delhi High Court in the case of JDS Apparels (P.) Ltd (370 ITR 454) has held that Commission' to bank on payments received from customers who had made purchases through credit cards is not liable to TDS under section 194H of the Act. This issue has also been decided in favour of the assessee by various Tribunals in the following cases:  Gems Paradise v. ACIT [IT Appeal No. 746 (JP) of 2011, dated 2.2.2012  Bhandari Jewellers v. ACIT [IT Appeal No. 745 (JP) of 2011, dated 2-2- 2012]  Tata Teleservices Ltd. v. Dy. CIT [2013] 140 ITD 451/29 taxmann.com 261 (Bang.) (para 8) and  Dy. CIT v. Vah Magna Retail (P.) Ltd [IT Appeal No.905 (Hyd.) of 2011, dated 10- 4-2012] Respectfully following the decisions cited above, it is held that the commission paid to the credit card companies is not subject to the TDS provisions of the Act. Accordingly the disallowance made by the Assessing Officer cannot be sustained and the Order of the CIT(Appeals) deleting the aforesaid disallowance, is upheld. Therefore, these grounds raised by the revenue are dismissed.” 8. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee‟s own case and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee‟s own case cited supra, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, grounds raised by the Revenue are dismissed. 9. In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 27/04/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/04/2023 M/s. Future Enterprises Limited ITA no.512/Mum./2023 Page | 6 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai